Tags: Buffett | Berkshire | ibm

Buffett's Berkshire Hathaway Buys $10.7 Billion Stake in IBM

Monday, 14 November 2011 08:14 AM

Warren Buffett’s Berkshire Hathaway Inc., which accelerated stock purchases this year, acquired a 5.5 percent stake in International Business Machines Corp., the world’s biggest producer of computer services, the billionaire chairman told CNBC.

The holding was acquired mostly in the third quarter and cost about $10.7 billion, Buffett told the business news channel in an interview today. IBM advanced 0.8 percent at 7:35 a.m. New York time in early trading.

“They have laid out a road map and followed it extremely well,” Buffett said in the interview of Armonk, New York-based IBM. “I probably read the annual report of IBM every year for 50 years.”

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Buffett, 81, drew down Omaha, Nebraska-based Berkshire’s cash hoard in the three months ended Sept. 30 as U.S. stocks headed for their biggest quarterly decline since 2008. The chief executive officer invested $23.9 billion in the period as he acquired Lubrizol Corp., took a preferred stake in Bank of America Corp. and broadened the stock portfolio.

“He had the funds and the opportunity to purchase shares at an attractive price,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. “He’s not going to panic when there is some temporary economic problems which could cause the stock markets to plunge for some period of time. He just sees that as a buying opportunity.”

The Standard & Poor’s 500 Index, which fell 14 percent in the third quarter, has advanced 12 percent since Sept. 30.

Buffett spent $11.4 billion on equity securities in the nine months ended in September, compared with $3.9 billion in same period last year and $3.2 billion in the first three quarters of 2009. The stock purchases this year are in addition to the $5 billion Berkshire spent on Bank of America preferred stock and warrants and the takeover of Lubrizol for about $9 billion.

‘We’ll Buy It’

“If the stock is cheap, we will buy it,” Buffett said in a Sept. 30 interview with Bloomberg Television.

Berkshire’s investable funds were boosted this year as Goldman Sachs Group Inc. and General Electric Co. returned financing that Buffett extended during the 2008 credit crunch. Cash was also bolstered by earnings at units from the Burlington Northern Santa Fe railroad to the Geico car insurer. The third- quarter investments reduced Berkshire cash hoard to $34.8 billion as of Sept. 30 from $47.9 billion three months earlier.

“The guy has a billion plus coming in to Omaha” every month, said David Rolfe, chief investment officer of Berkshire investor Wedgewood Partners Inc.

Berkshire, which posted profit of $13 billion last year, reported a 24 percent decline in third-quarter net income as Buffett’s equity derivative bets pressured results. Insurance units reported a $1.7 billion pretax underwriting gain, while net earnings at the railroad rose 8.5 percent to $766 million.

Stock Portfolio

Berkshire had $68.1 billion in stocks at the end of September. That includes investments of non-U.S. companies, including the biggest shareholding of Germany’s Munich Re and a stake in the U.K.’s Tesco Plc.

Buffett, in preparation for his eventual retirement, hired money manager Todd Combs last year and instructed him to focus on equities. Combs was assigned to oversee as much as $3 billion and can make trades without consulting Buffett. Berkshire said hedge fund manager Ted Weschler will join the company next year and take charge of a portion of the portfolio.

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Warren Buffett s Berkshire Hathaway Inc., which accelerated stock purchases this year, acquired a 5.5 percent stake in International Business Machines Corp., the world s biggest producer of computer services, the billionaire chairman told CNBC.The holding was acquired...
Monday, 14 November 2011 08:14 AM
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